Tukuafu v Glenfield Investments Limited HC Auckland CIV 2010-404-6628

[2010] NZHC 2117

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-006628

BETWEEN  KENNETH GEORGE TUKUAFU Plaintiff

ANDGLENFIELD INVESTMENTS LIMITED First Defendant

ANDSTANDARD MORTGAGE TRUST LIMITED

Second Defendant

Hearing:         (On the papers) Counsel:          T J Herbert for Plaintiff

A Gilchrist for First Defendant

Judgment:      29 November 2010 at 11.00 a.m.

COSTS JUDGMENT OF VENNING J

This judgment was delivered by me on 29 November 2010 at 11.00 a.m., pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Wadsworth Ray, Auckland

S F Pollard, Auckland

Copy to:            T J Herbert, Auckland

A R Gilchrist, Auckland

TUKUAFU V GLENFIELD INVESTMENTS LIMITED AND ANOR HC AK CIV-2010-404-006628  29

November 2010

Introduction

[1]      This judgment addresses the issue of costs between the plaintiff and first defendant  on  the  plaintiff’s  application  for  interim  injunction  and  the  first defendant’s application to set it aside.

Background

[2]      The  plaintiff  is  the  Court  appointed  property  manager  for  his  mother, Noelene  Tukuafu.    The  first  defendant  advanced  moneys  to  Mrs  Tukuafu  and secured the advance by mortgage.

[3]      Mrs Tukuafu failed to comply with her obligations to the first defendant.  The plaintiff issued a Property Law Act Notice.  The plaintiff intervened on his mother’s behalf and, through solicitors, took issue with the validity of the first defendant’s mortgage.   Ultimately the plaintiff instructed the solicitors to apply for an interim injunction to prevent the first defendant’s mortgagee sale of the property.   On 5

October,  the  day  before  the  scheduled  sale,  the  plaintiff  obtained  an  interim injunction following a short hearing before Asher J on a Pickwick basis.

[4]      In granting the injunction the Judge reserved leave to the defendants to apply to discharge or vary the injunction on three working days notice.  The first defendant applied to varied the injunction by application dated 11 October 2010.

[5]      The matter came before the Court on 27 October 2010 in the Duty Judge list. By that  time  counsel  for  the  plaintiff  had  filed  a  memorandum  confirming  the plaintiff was prepared, without admission or concession, to consent to the injunction being rescinded.

[6]      On 27 October Mr Herbert submitted that the costs of the injunction and the application  to  set  aside  should  be  reserved  and  be  costs  in  the  proceedings.    I declined that application noting that costs on interlocutory applications should be dealt with in advance of substantive proceedings:  r 14.8 and directed a timetable for the  exchange  of  memoranda  in  relation  to  costs.    I  did,  however,  reserve  Mr

Herbert’s position to advance that submission again in the plaintiff’s memorandum as to costs.

[7]      Counsel have exchanged memoranda as to costs and have confirmed that an oral hearing is not required.

The first defendant’s position

[8]      The first defendant seeks indemnity costs in the sum of $22,098.75 or, in the alternative, increased costs.  The first defendant calculates scale costs on a 2B basis to be $4,982.00 (or $7,614.00 if preparation to set aside the injunction was allowed on timeband C).

The plaintiff’s position

[9]      The  plaintiff  submits  that  costs  should  lie  where  they fall.    Mr  Herbert submits that it would represent an injustice if the plaintiff was to be punished for his actions by an award of costs against him.

Preliminary point

[10]     Mr Herbert criticised the first defendant for applying to rescind the injunction on 11 October, some four working days after the injunction was obtained, rather than engaging in further discussions with the plaintiff to see the matter resolved.   Mr Gilchrist suggests that the first defendant had to apply within a short time frame because of r 7.49.  But the reservation of leave in the injunction order, overrode the provision of r 7.49.  Mr Herbert also confirmed the plaintiff would not take the point. So to that extent, I accept Mr Herbert’s submission that the first defendant did not have to bring the application within five working days in accordance with r 7.49.

[11]    However, notwithstanding that, the first defendant was entitled to move promptly to set aside the injunction given that its security was potentially at risk.  I

reject the plaintiff’s criticism of the actions of the first defendant in moving promptly to set the injunction aside.  It was entitled to do so.

Decision

[12]     If the information before the Court on the application to rescind had been before the Judge when the application was applied for, it is extremely unlikely the Judge would have made the interim injunction.

[13]     The  information  now  before  the  Court  discloses  that  the  first  defendant received a request for refinancing in June 2008.   The property owned by the plaintiff’s mother Mrs Tukuafu was offered as security.   The loan was said to be required to repay existing debt.  The property had a value of $670,000.   The loan advance sought was $446,000 to be financed with family assistance and passive income from two minor dwelling units on the property.   The first defendant’s solicitors were advised that Mrs Tukuafu was 68 years old at the time.   The first defendant agreed to advance the moneys.  It sent the mortgage instrument and other settlement requirements to an independent firm of solicitors to act for Mrs Tukuafu.

[14]     The loan was documented, and the mortgage documents executed by Mrs Tukuafu  and  returned  to  the  first  defendant.    The  loan  was  advanced  and  the mortgage registered against the property on 2 July 2008.

[15]     The loan was due for repayment on 30 June 2010.  When the plaintiff failed to repay the loan the first defendant issued agreement a Property Law Act Notice. The Property Law Act Notice was served on 16 July .  It required the default to be remedied by 18 August.  The plaintiff was contacted on 18 July 2010 by his sister and told that Mrs Tukuafu had been served with a Property Law Act Notice.

[16]     The first contact the first defendant had regarding the matter was a letter from solicitors for Mr Tukuafu of 21 July 2010.  The solicitors advised that Mr Tukuafu held a power of attorney for his mother and suggested Mrs Tukuafu may not have had the capacity to enter the transaction.

[17]     By letter dated 22 July the solicitors for the first defendant replied.   They noted that they had understood Mrs Tukuafu had placed the property with Ray White for a sale by auction on 6 August which would now not proceed.   The first defendant’s solicitors noted that it would have been preferable if the sale had been by the owner rather than by mortgagee sale.  They also noted:

If no further action is taken by Mrs Tukuafu to sell the property or to refinance the same a mortgagee sale will be inevitable and the consequence of this is not likely to be favourable to Mrs Tukuafu.

We do not have a problem with KG Tukuafu dealing with the matter if in fact  he  has  an  attorney  document  which  authorises  him to  do  this.    ... Accordingly we invite you to either give us a copy of the attorney or your undertaking that the attorney authorises your client to conduct the affairs of Mrs Tukuafu and to put to us a proposal with a time line by which either the property can be refinanced or sold together with details of the work and/or efforts your client intends to take in respect of the property so that the best price is obtained.

[18]     The solicitors for the first defendant followed that letter with a further letter the  next  day in  which  they provided  more  detail  of  their  understanding  of  the transaction at the time the loan was taken out and the mortgage executed by Mrs Tukuafu.   In the course of the letter the solicitors repeated their invitation to Mr Tukuafu’s solicitors to respond with, inter alia, a copy of the power of attorney.

[19]     There was no response from the plaintiff’s solicitors.  The first defendant’s solicitors wrote again on 2 August 2010 noting their concern that they had not had a response to their correspondence.

[20]     On 6 August 2010 the solicitors for the first defendant wrote yet again with further detailed information regarding the transaction.   In the letter they addressed the issue that it appeared Mrs Tukuafu’s age had been altered on the copy passport provided to them.

[21]     On 6 September the plaintiff’s solicitors wrote to the first defendant noting they understood real estate agents had been instructed to commence marketing the property for mortgagee sale and requesting details of the marketing programme.  The solicitors for the first defendant responded promptly by letter of the same date.  They

provided  the  details  requested  and  noted  that  the  auction  was  scheduled  for  6

October.

[22]     On 16 September the plaintiff’s solicitors advised that they were applying through the Court for a property manager to be appointed for Mrs Tukuafu.  The next communication appears to have been a letter on 4 October from the Court appointed counsel for Mrs Tukuafu to the solicitors for the first defendant.  The solicitors for the first defendant responded advising that they were not aware of any circumstances that would prevent the first defendant from exercising its power of sale.  They left two messages with the Court appointed counsel which were apparently not returned.

[23]     The plaintiff then filed an application for injunction to prevent the mortgagee sale on 5 October, one day before the sale.

[24]     Attached to Mr Tukuafu’s affidavit in support of the application was a search copy of the register (register only) relating to the property in issue.  That disclosed that the property had been settled under the Joint Family Homes Act in 1965 and

1968 as to its various lots and noted the next transaction as the mortgage to the first defendant.

[25]     Although counsel for the first defendant, Mr Gilchrist, appeared before the Court on a Pickwick basis and presented information to the Court that suggested the loan advance was in fact a refinancing, the Judge noted in granting the injunction:

[4]       The  relevant  mortgages  were  signed  in  2008.    The  papers  raise questions (and I put it no more strongly than this) as to whether she actually signed some of the relevant mortgage papers.  There is an indication that her passport that was available at the time had been altered to understate her age. Of most significance is the fact that the title search attached to Mr Tukuafu’s affidavit indicates that the property was mortgage free before these very significant mortgages were executed in 2008.   It is difficult to see how legitimate mortgages could be created in those circumstances.

[5]       Mr  Gilchrist  has  shown  me  copies  of  sworn  affidavits  for  the defendants which I have only had a chance to briefly skim.  They indicate on their face a lawful and properly conducted mortgage transaction where Mrs Tukuafu was accompanied and guided throughout by her daughter Adele Tukuafu.   Mr Gilchrist has handed me a copy of a settlement statement which indicates that the 2008 mortgages may have been a refinancing transaction.  This is not supported by the title documents.  I accept, however, that it is entirely possible that this was a legitimate transaction from the point

of view of the vendors where they have acted throughout in good faith and are entitled to the protection of s 183 of the Land Transfer Act 1952.

[6]      However  I  am  satisfied  that  the  modest  threshold  of  a  serious question to be tried has been crossed on these papers.

(emphasis added)

[26]     A  subsequent  search  copy  of  the  register  for  the  title,  which  records  a historical search copy of the register, shows that there were three mortgages on the property discharged at the same date and time the mortgage to the first defendant was registered.  That historical search copy confirms the first defendant’s position that the loan was to repay earlier mortgages.  That search was not provided to the Judge.

[27]     Given the Judge’s comments, had that information and the first defendant’s letters of 22, 23 July, 2 and 6 August and 6 September being provided to the Court, it is unlikely that the Court would have been minded to grant the injunction.

[28]     Mr  Herbert  submitted  that  the  defendant  was  aware  of  the  threatened injunction and the defendant could have put the relevant information before the Court.  However, the obligation was on the plaintiff seeking an ex parte order albeit dealt with on a Pickwick basis, to put all relevant information before the Court.  It failed to do so.

[29]     Also, despite the initial communication from Mr Tukuafu’s solicitors on 21

July, and their knowledge by 6 September of the mortgagee sale scheduled for 6

October,  the  plaintiff  left  it  to  the  eleventh  hour  to  apply to  the  Court  for  an injunction.   For the plaintiff it is submitted that it took him time to familiarise himself with the matter, but he received notice of the situation on 18 July and two and a half months passed before he applied for the injunction.  In the meantime the first defendant’s solicitors presented a great deal of information in their correspondence which apparently went largely unanswered.

[30]     I am not able to accept the plaintiff’s suggestion costs should lie where they fall.  The plaintiff obtained an injunction against the defendant’s opposition and the first defendant has subsequently, successfully moved to set it aside.   The fact the

plaintiff did not oppose the setting aside does not affect the first defendant’s right to costs on the application.   Its relevance is to quantum, because no hearing was required.

[31]     In the circumstances the first defendant is entitled to costs both on attendance in opposition to the injunction and also on the application to set aside the injunction which the plaintiff obtained.

[32]     Given the matters I have outlined above the first defendant is also entitled to increased costs.  The plaintiff failed to comply with rules of the Court requiring full disclosure on an ex parte injunction.  Even if that was not sufficient to support an award for increased costs, I am satisfied that the actions of the plaintiff in this case support an award of increased costs on the general provision of r 14.6(3)(d).

[33]     I accept, however, that the plaintiff’s failures are most likely to have been through oversight rather than any deliberate attempt to mislead the Court.   In the circumstances I fix the increased costs at an uplift of 50 per cent above scale costs, having regard to the Court of Appeal decision in Holdfast NZ Ltd v Selleys Pty Ltd.[1]

[1] Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897.

Quantum

[34]     I am content to adopt Mr Gilchrist’s proposed schedule of costs on a 2B basis.   Mr Herbert took objection to a number of those items.   First, Mr Herbert submitted the claim for preparing and filing opposition to the application for injunction should be disallowed as no opposition was filed.   However, affidavits were prepared and an opposition (albeit on a Pickwick basis) mounted.  I noted that the first defendant has not claimed separately for preparation time to respond to the injunction.  I allow the claim for preparing and filing a response to the interlocutory injunction at .6.

[35]     Next, Mr Herbert submitted that the time of the hearing was closer to a half hour than a quarter day.   Mr Gilchrist says it was closer to an hour.   The time is

measured in quarter days for sound practical reasons to avoid just this sort of argument.  The claim for a quarter day is approved.

[36]     Mr Herbert then submitted that the cost of the appearance on 27 October should be recorded as a cost in the proceeding rather than related to this application. That submission is misconceived.  The reason the matter was before the Court was to address the application to set aside the injunction.  As noted, if the matter had not been consented to then there would have been full argument on it and a further claim for a half day would have been allowed.

[37]   Finally, Mr Herbert submitted there should be no allowance for the memorandum on costs itself.  However, costs were not agreed.  The first defendant has been put to the expense of preparing a memorandum in relation to costs.  I see no reason in principle why the additional costs which have arisen out of the failure of the parties to agree should not be payable.  Again I approve the claim for .4 day.

[38]     The end result is that costs are fixed in the sum of $7,473.00 together with disbursements of $654.21, in total $8,127.21.

The position of the plaintiff

[39]     There is force in Mr Gilchrist’s submission that the correct plaintiff should be Mrs Tukuafu rather than Mr Tukuafu, given Mr Tukuafu’s position as property manager for Mrs Tukuafu.   Mr Tukuafu  is effectively Mrs  Tukuafu’s litigation guardian for the purpose of this proceedings.

[40]     Given that the costs order of $8,127.21 will be against both Mr Tukuafu and Mrs Tukuafu jointly and severally:  r 4.42 in the expectation that Mr Tukuafu will be entitled to resort to Mrs Tukuafu’s property under s 4.42(2) and, perhaps s 50 of the

Protection of Personal and Property Rights Act 1988.

Venning J